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The municipal government has imposed a temporary, five-year tax increase on the value of property that will raise $80 million at the end of the
The municipal government has imposed a temporary, five-year tax increase on the value of property that will raise $80 million at the end of the first year. Property values are setimated to grow at a rate of 3 percent per year. a. What is the present value of the total amount of tax the proposal will raise if the discount rate is 8 percent? b. What is the present value of the total amount of tax the municipal government could raise if the tax is permanent and the discount rate is still 8 percent?
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